Price Controls and Quotas: Meddling with Markets - End of Chapter Problems 1. In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides. Assume, for simplicity, that all taxi rides are the same distance and therefore cost the same. The accompanying table shows the demand and supply schedules for taxi rides. c. Suppose that the stock market crashes, and, as a result, people in Gotham City are poorer. This reduces the quantity of taxi rides demanded by 6 million rides per year at any given price. Illustrate this change in the market below, paying special attention to the scale on the quantity axis. Fare (S/ride) Quantity of rides (millions s per year) Fare Quantity Quantity (per ride) demanded supplied $7.00 10 12 6.50 11 11 6.00 12 10 5.50 13 9 5.00 14 8 4.50 15 7 What effect will the mayor's new policy have now? Market for taxi rides 7.0 6.5 60 5.5 5.0 D 4.5 2 4 6 8 12 10 14 13 16 18 20 22 It will force the market into equilibrium. It will have no effect. A surplus of 2 million rides per year A shortage of 2 million rides per year

Price Controls and Quotas: Meddling with Markets - End of Chapter Problems 1. In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides. Assume, for simplicity, that all taxi rides are the same distance and therefore cost the same. The accompanying table shows the demand and supply schedules for taxi rides. c. Suppose that the stock market crashes, and, as a result, people in Gotham City are poorer. This reduces the quantity of taxi rides demanded by 6 million rides per year at any given price. Illustrate this change in the market below, paying special attention to the scale on the quantity axis. Fare (S/ride) Quantity of rides (millions s per year) Fare Quantity Quantity (per ride) demanded supplied $7.00 10 12 6.50 11 11 6.00 12 10 5.50 13 9 5.00 14 8 4.50 15 7 What effect will the mayor's new policy have now? Market for taxi rides 7.0 6.5 60 5.5 5.0 D 4.5 2 4 6 8 12 10 14 13 16 18 20 22 It will force the market into equilibrium. It will have no effect. A surplus of 2 million rides per year A shortage of 2 million rides per year

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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